IIPM ARTICLE AND EDITORIAL

Saturday, August 14, 2010

“The equivalent of two Valdez spills is gushing into the Gulf, per week!”

John Hocevar, Oceans Campaign Director, Greenpeace USA, talks to B&E’s steven philip warner about the damage done and the consequences thereof of the most recent BP Oil spill holocaust

B&E: The most recent BP oil leak disaster in the Gulf of Mexico is estimated to lead to great ecological disbalances. What are you estimates of the damage?
John Hocevar (JH): The impacts of the BP Horizon disaster on the Gulf of Mexico ecosystem and coastal communities are going to be felt for decades. It was terrible seeing oiled birds, dolphins swimming through oily water, and tens of thousands of dead hermit crabs. Of perhaps even greater concern is the impact on habitat, which will have long-lasting effects. Mangroves and grasses that have been covered in oil will die, and many low lying islands will wash away completely once the vegetation that holds them together disappears. Some of the islands which will be lost include some of the most important bird rookeries in the Gulf. Unfortunately, this is just the beginning. No one seems to know for sure how much oil has been spilled, but the estimates keep increasing. Some scientists are now saying that the equivalent of two Valdez spills is gushing into the Gulf right now, per week. So far, most of the oil has remained below the surface, offshore, and out of sight – and so have the impacts to marine life.

B&E: The Obama administration is acting first hand to take charge of this situation that already looks beyond control. It has been estimated by Credit Suisse that the cost of the clean up act can touch upto $49 billion in the four years to follow. Even BP is taking huge steps to accelerate its clean up acts. How far do you think will the mission be successful?
JH: The effort to clean up or mitigate the impacts of this disaster is considerable, but has already proven insufficient to protect sensitive areas. The oil has entered the wetlands, where it will be impossible to clean. Even under the best of circumstances, at most 15-20% of the oil can be recovered. In this case, I would be surprised if they could recover more than 5%. The harsh truth is that the only way to avoid disasters like this is to prevent offshore drilling from happening in the first place.

B&E: So you think BP is the culprit in the spotlight or is it Tony Hayward who is the criminal in the crowd? Or are we to condemn the whole concept of deepwater drilling?
JH: It is not a question of BP or Tony Hayward being a particularly bad apple, or even of deepwater drilling being much more dangerous than shallow drilling. Many big oil companies have had major accidents in the past under various circumstances, and more recent blowouts have occurred in shallow water than deep. Part of the problem with assessing what the spill is doing to Gulf species has been a lack of transparency by those doing the assessing. BP has hired contractors to test dead animals, but what we’ve seen from them so far has been a bit dubious. When contractors tell the media that the number of dead dolphins is no cause for alarm, or that there is no link to the spill, it doesn’t exactly instill confidence.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Friday, August 13, 2010

Tom’s secret of success

Tom Cruise’s new flick Knight and Day is gaining great reviews and guess whom he credits his success to? His four-year-old daughter – Suri Cruise! He reportedly told a magazine about how she hears out the scripts of his films. He simplifies the plot for her understanding and answers all the (mostly relevant) questions this little woman asks. And in trying to interest her and make her laugh, he gets better and better!

Thursday, August 12, 2010

Time to stop the rabble rousing Mr. Cameron!

Why the deficit control measures given by UK Prime Minister David Cameron suspiciously point to his lack of understanding of economics

Most amusingly, the current budget released by his government shows an expected total interest outflow of £250 billion by 2015, which is much higher than even the worst estimates before budget. Is Cameron even reading what Osborne is preparing? It doesn’t stop here. UK’s public debt today stands at £903 billion – equivalent to 68.5% of GDP – and the net debt stands at 62.2% of GDP. Guess what Cameron accepts that he is going to achieve through his budget – the net debt will actually grow to 70% of GDP in 2014. Are we imagining it or has the Osborne-Cameron combine not remembered to stand up to their words of a week before? Even if we consider UK’s current national debt, which stands at 51% of GDP, it’s quite alright by international standards. Many other countries have higher national debt to GDP ratios than UK’s. For example, Japan’s national debt is close to 194% of the GDP, Italy’s is over 100%, even the US is close to 71%. The fact is that by not cutting net debt, the duo is actually doing good for UK.

Let’s jump to Cameron’s understanding of the deficit. Britain’s deficit last year was actually considerably lower than previously calculated. Deficit has actually come down from £178 billion in 2007 (5.5% of GDP), to £163 billion in 2008, and finally to £156 billion in 2009 (11.5% of GDP). What worries Cameron is the figure of 11.5%. Although this is the third largest percentage amongst EU nations, there’s less cause for concern as the deficit was mainly due to two reasons – one, the recession, and two, the bailout of UK banks, both of which are not expected to continue in the future.

But Cameron’s biggest and perhaps gravest mistake for the UK economy is his decision to curtail government spending. While in 2008 and 2009, government spending was £582.1 billion and £638 billion, Cameron has promised to cap it at £637 billion for 2010/11, conservatively increasing it to reach £711 billion in 2015/16. The problem is that the moment the rate of growth of government spending falls, it’s the biggest discouragement for GDP growth. Add to this the timing – which is right after the slowdown, when the nation requires increased spending – and we have the makings of a most dangerous GDP stagnation era.

Deficit, debt and government spending were the three things Cameron shouldn’t have worried about – especially after having done the great work on taxes. Sadly, he did just that. The rabble rousing worked – people love him.

Akram Hoque

Wednesday, August 11, 2010

Mood of the Nation

An exclusive TSI-CVoter Opinion Poll on politics and governance

Methodology

The Mood of the Nation opinion poll has been carried out with a national representative sample of 8,721 randomly selected respondents. The survey was done with CVoter's specially designed Computer Assisted Telephonic Interviews (CATI) process across 180 Lok Sabha seats. The survey was conducted in April-May 2010. The data received has been weighted to India's Census profile. Margin of error is plus or minus 3%. As part of our Mood of the Nation initiative, CVoter is now keeping weekly track of the pulse of the people and what India’s rural and urban masses are thinking and feeling about local and national governance. This is being facilitated by CVoter's Weekly Omnibus wherein our researchers quiz voters for their perception about the performance of the country’s political leaders. They also keep a tab on the contemporary issues that matter to the masses. We hope that the initiative will not just help voters make their voices heard but will also hopefully serve as a weekly reminder to the nation’s political bosses about the immediate and long-term needs and ambitions of the voters who brought them to power in the first place.

Tuesday, August 10, 2010

Fatwa’ed!

The times they are a-changin’ and established norms and beliefs are now being challenged...

When people strongly believe in something, then sometimes, their minds become less receptive to factors that threaten to alter what they hold close to their hearts. This subconscious mind-play subjects people, and religious heads especially, to contend with the difficult tight-rope walk between religious diktats and changing mind-sets. Battling a similar situation, the Darululoom Deoband group, was recently in the news, allegedly for issuing a fatwa against women working alongside men without veiling themselves. The Darululoom Deoband is an Islamic school located in a town called Deoband in Uttar Pradesh. Founded in 1886 by renowned Muslim scholars, this school propagates Sunni Islam in the Indian sub-continent.

This injunction was vehemently condemned by liberal Muslim women around the country. The Deputy Vice-Chancellor of Darululoom Deoband, Maulana Abdul Khaliq Madrasi, however clarified, “We did issue a fatwa, which was based on the religious ruling, but it was an opinion meant to be personal and not to be issued for public interest. This fatwa was not for all women. It was for one person only.” The meaning of fatwa is also misunderstood by many. It’s said to be a legal pronouncement in Islam issued by religious specialists, but it is to be noted that the opinion of the religious specialist may or may not be followed by the advice seeker. Talking about the fatwa, Maulana Abdul further elaborated, “We keep getting a lot of letters where several problems of people have to be addressed. The fatwa department sends back the instruction issued by the clerics in a sealed envelope. Similarly, we had received a letter where a woman needed advice on what she should do to support her family. So, we issued a fatwa to her advising her to work in a place where there are women only and if not, then definitely do purdah (wear a burka).” On questioning him about a different statement issued in the media, Maulana Abdul shot back saying, “I don’t understand how this fatwa was leaked to the media. We have explained our stand that according to Islam, Muslim women cannot be together with men without purdah. Those who do not follow this are not true Muslims. But this is just a religious order. We can definitely not punish anyone who chooses not to follow the religious rules. We have issued several fatwas in the past. Our job is to give advice based on what Islam says. To follow it or not is up to the individual.”

Centuries-old rules pitted against evolving times are probably at the heart of this imbroglio. The Belgium government’s ban on the burka had created an uproar among Islamic groups. Says Maulana Abdul, “People should be allowed to do what they wish to, if it’s not causing any harm. How can you impose a ban on anything? This rule might be unacceptable to many Muslim women. This is also injustice. It’s unfair.” Well, true. But why should there always be resentment with acts of liberation? For instance, the controversies created around Sania Mirza’s skirt, Salman Khan attending Ganesh Puja, MF Hussain’s paintings, Shiv Sena bashing youngsters who celebrated Valentine’s Day. Then again when a lot of support came streaming in for the Muslim, Lebanese-born Miss USA, Rima Fakih, who paraded in a bikini on the ramp, there’s hope enough to believe all is not lost yet!

Every religion believes in peace and harmony and eventually it’s up to both, us and the custodians of every religion to let it not be misjudged and misunderstood.

Spriha Srivasatava

Monday, August 09, 2010

Water Woes Intensify

When it was predicted about a decade back that the next World War would be fought for control of water, sceptics dismissed it as a mere hyperbole. Now, with killings over water being reported from across the country, the spectre of the past is becoming a scary reality. The team of anil sharma, raju kumar and nishant bhadreshwar take stock of the situation

It is a truth universally acknowledged that a single man in want of a wife must be a good provider. However, what the word ‘provider’ encompasses has acquired a new meaning in Rajasthan. Here, a man must be able to provide water to the family apart from other things. Sounds like a leaf out of Ripley’s ‘Believe It or Not’, but the acute water scarcity in the state has made a lot of people wary of marrying off their daughters in villages where women would inevitably have to trudge for miles everyday to fetch some water. “Often, women have to walk for miles to collect water. Many people are reluctant to marry off their daughters into such communities,” says Rameshwar Chaudhari, a resident of village Chopra Dhotra in Jodhpur district of Rajasthan. His village is facing severe water crisis.

Rajasthan, spread over 10.4% of the country’s geographical area and sustaining more than 5.5% of the human population and 18.70% of the livestock, has only 1.16% of the total surface water available in the country. This year, the ground water situation has turned alarming in the state with only 30 water blocks out of the total 237 left in the safe zone. With increase in the population and subsequently the demand for water for various purposes, the state is already in the middle of a terrible water crisis. The per capita annual water availability in the state is about 650 cubic meters against the minimum requirement of 1,000 cubic meters. “I am 60 years old and have never seen a situation like this. We get water only once or twice a month and even that comes with low pressure. It takes over half an hour to fill a bucket,” says Kamla, a resident of Naulakhi in Sri Ganganagar district. The crisis has also become so acute in Atru in Baran district that the water department—in spite of spending Rs.20,000 daily on the supply of water—is finding it difficult to meet the local demand through tankers.

The local administration in Akhlera in Jhalawar district, having a population of over 12,000, is now planning to engage 150 plus tankers to supply water. The only source of water in the town, Amalvada Deh dam, is drying up fast. Similar situation has emerged in Sojat Road in Pali district where the administration has demanded a special 65 wagon water train to overcome the crisis. Women in Bhilwara town of Rajasthan recently blocked the road in front of the municipality, demanding increased water supply. “We want more tube wells to be dug up so that we can get water,” says Kamla, a housewife. Water is being supplied once in every five days in the town famous for its textile industry.

Saturday, August 07, 2010

The page 3 of the BPO industry’s here

One could clearly see a sudden increase in the number of M&As in the Indian BPO industry over the last year. What is it that is actually prompting players to go for a kill? by Ashutosh Harbola

While 2008 was a great year for mergers and acquisitions (M&As) within the Indian BPO industry (the industry witnessed 13 M&As including Citigroup Global Services’ acquisition by TCS for $505 million, Quattro’ takeover of RSM McGladrey and Babel Media for $50 million & $125 million respectively, WNS buying Aviva Global Service for $230 million, et al), uncertain economic conditions across the globe perhaps forced several companies to hold on to their cash last year (M&A activity within the industry reduced by 55% in 2009). But the year still saw players like EXL Service Holdings acquiring Schneider National (for $40 million), Cognizant buying UBS BPO Unit (for $75 million), EXL Service Holdings purchasing Am-Ex Travel Services Captive India for $30 million and Infosys BPO taking over McCamish Systems for $38 million.

FY2010 has just started and players like Genpact and Aegis have already announced one acquisition each. While Aegis, the back office company promoted by the Essar Group, has agreed to acquire US-based education and financial service provider Sallie Mae’s customer service centre, India’s largest back-office firm Genpact is taking over US-based analytics and data management services provider Symphony Marketing Solutions. CBay Systems India and Avantha Group too have announced the acquisition of Spheris India and US-based Pyramid Healthcare Solutions respectively. So what is it that has prompted Indian BPO players to go in for the M&A option, one that comes with a huge amount of operational and value destruction risk?

The expectably positive sounding Nasscom-McKinsey report has projected the BPO space to be a $360 billion market opportunity across the globe by 2020. This is one reason why the industry continues to remain a favourite with VC & PE players who accounted for almost over 20% of all deals in 2009. Not to forget, their total investment portfolio for this industry has grown 16 times in the past eight years, at a CAGR of 42%. Even in a year weakened by recession, there has been no let-up in their interest in the BPO sector in India, with a 9% increase in total investment portfolio over 2008. And with the overall global economy recovering in 2010, that concentration is only poised to augment further.

Another thing which has prompted the shift is the fact that the Indian BPO sector has evolved significantly over the last decade, and has matured beyond the pioneer phase to enter the ‘emerging rapid growth’ phase. Players in the BPO industry can now be seen foraying into areas such as business analytics, knowledge-based services apart from transforming clients businesses through a mix of re-engineering skills, technology enabled platforms, new operating models and increased depth of services.

Friday, August 06, 2010

Your butt is my smokin’ problem

Smoking regulation has achieved some success; but it is pathetic that governments don’t have the honesty and sincerity to completely ban cigarette production globally – it’s clear how well money and lobbying works

It is appalling that despite all the medical advances mankind has made, the twenty first century still grapples with diseases that are perhaps even deadlier than those in the dark ages and have killed millions. The least we can do is to not add to the already depressing statistics through a social ill like smoking.

Innumerable researches have concluded that cigarettes contain 11 different known compounds that cause cancer. And almost everyone in any corner of the world – smoker or a non-smoker – is quite convinced that there are enough reasons to quit smoking irrespective of age, wealth, colour of skin or region where they live. Nearly every nation on this earth has realized the need for policy interventions and have gone some distance as well. They have achieved some success too, especially in the developed part of the world. As per data provided in Tobacco Yearbooks by Economic Research Service, US Department of Agriculture, during the 17 years between 1990 and 2007, while production and export of cigarettes in the US dropped by about 34%, consumption decreased by 31%. In 1990, cigarette production was 709.7 billion units, which came down to 471.6 billion in 2007. While the consumption was around 487 billion units per year in 1990, it came down to 360 billion in 2007 in the US. The picture is pretty similar in other developed nations of the world.

However, this does not mean that the job is done. Data on a global scale presents a horrifying picture today – more than ever before. There are 1.1 billion smokers in the world, and if current trends continue, the number is expected to reach 1.6 billion by 2025. More horrifyingly, of these, about 80% live in the low or middle-income countries. There are over 300 million smokers in China itself; consuming over 1.7 trillion cigarettes a year, which means 3 million cigarettes a minute. Researches further show that approximately 10 million cigarettes are purchased every minute; 15 billion are sold each day, and over 5 trillion are produced and used annually.

The true return of this booming business is evident in the fact that in every eight seconds, tobacco use claims a victim in some part of the world. That means around 5 million deaths annually. Moreover, trillions of filters, filled with toxic chemicals from tobacco smoke, pollute the environment as discarded waste every year. Realizing the importance of controlling this menace, many countries have laws in place to ban advertising and any kind of promotional activities related to smoking. Despite this, a 1998 survey found that tobacco companies were among the top 10 advertisers in 18 out of 66 countries surveyed.

Thus anti-smoking policies have worked to reduce tobacco consumption; but it is still a serious issue that needs to be brought under control. In such a situation, it is often debated whether banning the tobacco production itself as a policy decision would deliver the desired results. There are complications on this front. Chinese counterfeit cigarette production reached an unprecedented 400 billion cigarettes a year, enough to supply every US smoker with 460 packs a year in just one decade since 1997; making Yunxiao the “illegal cigarette manufacturing capital of the world.” Also, there is a case of a conflict of interest, since the tobacco industry funds government treasuries massively every year.

To ban cigarette production will not only need strong political will, but as the 2005 movie Thank You For Smoking clearly showed, will need a lot of honesty – with the Tobacco Master Settlement Agreement between four largest US tobacco companies and 46 US states, which freed the companies of liability due to harm caused by tobacco use – being a shocking example.

Akram Hoque

Thursday, August 05, 2010

Living up to their name finally?

From a regional player that faced the ire of debtors in 2003 to a company that is aiming to be one of the leading cement players in India in the coming times, India Cements is planning a paradigm transformation. Can it go the distance? by Virat Bahri

Besides being dependent on the vagaries of one market, India Cements also faces the issue of high dependence on coal imports, where fluctuations in coal prices and exchange rates affect it in a big way. Naturally, as the company goes about with its capex plans, it would be more difficult to sustain margins if they don’t take steps to reduce costs related to coal as well as other inputs for its operations. The company is planning two 50MW plants and has also completed the formalities for a coal mine acquisition in Indonesia for the same, according to Srinivasan.

Then there is the lurking question of its continuing debt obligations, which are an outcome of the CDRM mechanism; and stood at Rs.1.02 billion as on September 2009. Furthermore it has $75 million worth of FCCBs due for redemption in 2012, which has been speculated as the major reason for the recent QIP issuance. Jinal Joshi, cement analyst, Jaypee Capital Services Limited, comments to B&E, “I’m bearish on the stock due to exposure towards FCCBs (which are likely to come for the redemption/conversion in FY’12) and higher depreciation and interest costs due to completion of capex in FY’11.” While the situation of debt is not as bad as it was in 2003, it is definitely a detriment to the company’s capex plans; whether they be for greenfield expansions or for acquisitions. In a sector where current installed capacity is 252 mtpa and 76 mtpa is expected to be added in the next two years, fast-paced capacity expansions are critical to gain a lead over the competition; and unless that happens, the CSK edge will have little meaning for India Cements. Adds Rakesh Singh, “The aim (of our expansions) is that we should be able to move at the same pace as the market if not faster.” He also tells us that the company cites service to be the key differentiator as they move from state to state. For instance, the company has mandated that its plant or branding unit should not be at a distance farther than 300 km. from its customers or dealers.

Also, the situation of surplus supply in the South Indian market is expected to persist, which will continue to hamper realisations. There was some improvement in prices in the month of March, but that is expected to be short lived. Archna Khemka, Analyst, Edelweiss Securities, elaborates, “Prices are up to INR 210-225/bag in Hyderabad. Interestingly, prices in other states like Tamil Nadu have also shot up to ~INR 260/bag levels. Interaction with market participants reflect that current hikes are opportunistic and discipline is unlikely to last in monsoon.” According to Joshi, the company’s realisations are expected to fall by another 5% in 2011 due to its huge presence in the South Indian market. The situation is expected to stabilise in 1-2 years, since part of the new capacities have been absorbed and infrastructure investment is happening at a rapid pace. But till then, the Southern market will continue to face realisation issues. Rupesh Kumar, Analyst, Angel Broking, agrees, “Short term concerns on expected oversupply in next few months that will lead to a drop in realizations & rising cost pressures on account of higher coal prices as well as higher freight costs due to the issue of wagon unavailability.” On an overall basis, the demand is going to grow quite well for India. Amber Dubey, Director, KPMG Advisory, tells, “Over the next few years, demand from housing sector is expected to slow down but will be compensated by demand from infrastructure projects (roads, bridges, etc.) and overall cement industry is expected to grow with a CAGR of 7-8% over the next 5 years.” Naturally, one can expect more acquisitions, expansions and attempts by more other regional players to go national.

So ultimately, India Cements has two major contrasting obligations – to ensure smooth debt repayment on one hand and to expand pan-India footprint at a rapid pace on the other. Even though analysts may advise caution, market trends clearly call for upping the ante, while keeping their debt at manageable levels. It’s time for new ideas and for a more aggressive, risk taking Gen-Next, which is why the induction of Srinivasan’s daughter Rupa Gurunath into the board is a positive step. Holding on to their dominant South Indian market position is not a choice anymore, a fact they have realised.

With inputs provided by N. Asokan from Chennai

Virat Bahri

Wednesday, August 04, 2010

Desperately seeking Johnny

After having worked with some of the hottest men in Hollywood, JLo is desperate for more! Her quest won’t end until she works with Johnny Depp. The Monster in Law actress is even ready to go toothless, wear a pirate’s hat and an eye-patch if that meant she could work with Depp! We’re sure Depp must be floored!